After Stunning Expansion, China’s Community-Buying Industry Quickly Contracts

The richest Chinese tech giants have put the breaks on community buying, a process where tech giants facilitate the traditional practice of neighbors pooling money to buy bulk items cheaply, a report says.

Hundreds of startups have gone bankrupt already, and investors could lose billions of dollars as a result.

Community buying started as a rural phenomenon. Farmers teamed up to save money and buy supplies in big volumes.

But gradually it’s become more urban as smartphones became ubiquitous. Recently it’s been used mostly for things like buying groceries, instead of seeds and fertilizer as it had been before.

There were hundreds of thousands of neighborhoods using JD.com, Meituan, Pinduoduo and others, in what seemed like a new frontier for eCommerce. However, that didn’t pan out — the industry was caught up in a crackdown from the Chinese government, which last year saw fines on various community buying platforms for “excessive spending” on promotions to win users.

Community-buying startups seemed like a confident bet early in the pandemic, with smaller cities ordering daily necessities in bulk. But big companies eventually subsumed smaller ones, and the market began to tail off.

The report says that Meituan has curbed its community-buying operations in Beijing. That came with a closing of “hundreds, if not thousands” of pickup points around the city, in order to go along with COVID restrictions as cases surged.

In related news, PYMNTS wrote that China might actually be putting a pause on its regulations to help the economy.

Read on: China’s Tech Regulatory Spree May Have Unintended Consequences

This comes as many major world economies have been passing legislation to tame the big tech companies.

China’s top internet regulator will meet next week with tech giants to talk about the regulation, and some in the know have said this could show officials are acknowledging how regulations have hurt the private sector, with the country’s economy in flux because of COVID measures.